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How GungHo Online Entertainment, Japan's most profitable publisher, got so big

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Earlier today in Japan, GungHo Online Entertainment announced that, with three-quarters of their fiscal year complete, it has so far made 68.5 billion yen in operating profit for 2013, nearly $700 million, based on total sales of over 116 billion yen. This profit is over 27 times what GungHo tallied up this time last year, and while it's nearly all due to a single smartphone game (Puzzle & Dragons) hitting it massively big in Japan, it still makes GungHo — for now, at least — a giant presence in Asian gaming.

It is interesting to note that Kazuki Morishita, the Tokyo-based publisher's CEO, originally wanted to be a comedian. "I graduated from high school and I tried to become a manzai artist," a traditional sort of Japanese stand-up comedy, as he told Famitsu in this week's issue. "Even my teachers at school said I was suited for it. I did that for about three years, and then my partner quit and I gave it up, but really, the core of what I'm doing now hasn't changed that much. Just like how you try to make people laugh with comedy, whenever someone plays our games and says 'This is really fun,' it makes me really think 'Man, I'm glad I'm running a game company'. The biggest thing that's changed is that, after making lots of errors and mistakes, GungHo's expanded to a large company."

Morishita joined GungHo in 2002, just as the company (originally founded in 1998) shifted focus from developing Internet auction software to administrating online games in Japan and Asia. "That was back in the ISDN days, mostly, before DSL was very common," he recalled. "If we didn't have an open market, we figured that it'd be too difficult to expand the online game market and give new things to gamers all by ourselves. So we switched gears and shifted to the PC, even though to be honest, I really hadn't personally played a lot of PC games. I always liked console games and I think we've always had console games in our sights with GungHo since the beginning. Our drive was to build an era where we could do online games on the consoles."

Morishita always had a vision of moving on from PC-based MMOs like Ragnarok Online and focusing on mobile devices. "Back in 2002, we wrote in our 10-year plan that we'd make online games for cell phones," he said. "We sure didn't have any way of imagining how smartphones would turn out, though! We figured that working online components into games would be a difficult process, one that we could specialize in and prepare for ourselves. To an external observer it probably looks like we've started with PCs, then went to consoles and then smartphones, but really, we're just following the plan we had all along."

That plan has resulted in P&D, a game that's recorded over a million downloads in North America but over 20 million in Japan, a nation with a population of 126 million. "P&D probably isn't the grandiose thing people around us may think it is," Morishita said. "We didn't make it with the idea of turning it into a huge hit. All we did was make a game we thought would be fun; we didn't have any particular goal for it, so it still doesn't really feel like it's happening. Still, having all these people call it fun makes me really happy. It gives me a sense of achievement that numbers can't. It's certainly a fact, too, that P&D's success has made the company a brighter place overall, and I'm definitely happy about that too."

With this success has come expansion — most recently in February, when Goichi Suda's Grasshopper Manufacture entered a partnership with GungHo. Morishita sees this expansion as a natural process, not something to hurry along too much. "When it comes to making good games, we don't have any particular regulations to follow," he said. "Once you decide to make a game, you basically are free to do what you want, make it how you like. I think that's the best way to go about this, and certainly, I don't think we've got a 100 percent perfect environment. Everyone works together to make up for what we lack; if a project is short on people, then members of other projects can pitch in."

What's in GungHo's future? Beyond a Puzzle & Dragons 3DS game due out December in Japan, Morishita discouraged the idea that it will invest very much in traditional game consoles. Still, as far as he's concerned, the sky's the limit. "People may think that I spend too much time thinking about stuff like this, but we are thinking about the next ten years," he said. "We have to keep evolving with the times, or else we won't survive. Besides, I think we're really just getting started."